Peter Tertzakian: One energy crisis later, has anything really changed?

On Tuesday, the United States will choose a new president. Americans have high hopes for "change" and "experience" in dealing with the problems of the world. However, on the matter of energy consumption, the American experience over the past century should teach both candidates that change is not forthcoming anytime soon.

Regardless of who takes the oval office, the problem of rising oil and gasoline prices is going to recur during the winner's first term in office. The financial crisis has trashed the economy, but hasn't solved any of the root energy problems that led to rapidly rising commodity prices prior to the banking meltdown. The core issues -- supply tightness and unchecked energy demand growth among three billion people in emerging economies -- still loom large in the background. So too does North America's addiction to all types of energy, which on a per-capita basis is two-to-three times the average of other wealthy, industrialized regions like the European Union and Japan.

The leverage to proactively avoid the adverse effects of future price shocks lies in controlling the demand side. Yet both presidential candidates' policies are heavily biased to supply-side solutions. Overall, the content of what's being proposed by either McCain or Obama is a series of variations on what has already been adopted by lawmakers in the Energy Independence and Security Act of 2007. In that act, which took several years of partisan politics to draft, only two of 13 major action points address the demand side. The other 11 centred on how more barrels and electrons can be found or generated, regardless of whether they are renewable or non-renewable.

Both candidates tout increasing vehicle fuel efficiency in one way or another. Figuring out how to get more miles out of a barrel of oil is worthwhile and essential -- as long as consumers don't overwhelm the efficiency gains by driving more miles, buying bigger gas guzzlers, and loading up with more and more electrical gadgets that are parasitic to fuel economy. That's really been the North American story over the past 20 years, and the relatively minor increase in the sales of small cars from May to July isn't going to affect the big balance.

Energy efficiency is often confused with conservation, but the two are not the same thing. There's a huge difference between screwing in a more efficient light bulb and turning the light off when not needed. Similarly, driving less has a far more powerful effect on reducing oil consumption than driving with a marginally more efficient engine. Again, I don't want to leave the impression that energy efficiency isn't worthwhile; of course it is, but it's a supply-side approach masquerading as a demand-side remedy.

In fact, Americans have been cutting back on driving, and using less gasoline since May. But let's think of the forces at play. It's taken a massive spike in fuel prices, followed by a couple of serious hurricanes, and then the worst financial crisis since the Great Depression to bring gasoline consumption down by a measly three per cent; a relatively inconsequential 300,000 barrels per day on 9.5 million barrels per day. And that's relative to 2007, which was a year of record demand.

Notably over the past two weeks, amidst the ongoing noise of the financial crisis, U.S. gasoline consumption has been quietly ticking up again. That's not surprising: the price of gasoline is down 35 per cent in the span of two months, dropping from $4.25 US to $2.75 US a gallon ($1.12 US to 73 cents US per litre).

Recessionary forces will keep gas pumps underutilized for a couple of quarters yet, but cheaper prices will lure people back to expanding their energy appetite again. It's all a setup for being vulnerable to the next, inevitable rise in oil prices.

"Change" and "experience" have been resonating buzzwords in this U.S. presidential campaign. On the energy front, the experience of the United States (and Canada is no different), is that it sets itself up for the next energy crisis whenever prices retreat. Until reducing energy demand is the focus of attention, change is not forthcoming.